Deutsche Bank’s Sewing calls French situation ‘concerning’

Deutsche Bank Chief Executive Christian Sewing said on Wednesday, Oct. 21, that France's fiscal and political instability, which has spilled over into violent protests, is a reason for concern. He expects markets to stay volatile until the country's presidential election next year, Bloomberg reported.bloomberg.com

"I wouldn't call it a debt crisis at this point in time, but I think it's a wake up call in particular for all public financing that budget disciplinary is key," Sewing said in an interview on Bloomberg Television. He added that the situation "will remain volatile, I think, up to the elections in May," and said "the bond market is not lying".uk.finance.yahoo.com+1

Borrowing costs hit 24-year high

He spoke on the same day France's benchmark 10-year bond yield briefly rose above 5% for the first time since 2002. The premium investors demand to hold French debt rather than German Bunds was about 157 basis points, close to levels last seen in 2011, Reuters reported. Rushabh Amin, a portfolio manager at Allspring Global Investments, told Reuters the market was "starting to look quite stressed".cnbc.com+2

Sewing made the comments on the sidelines of the Berlin Global Dialogue. He also said he does not share concerns about an AI bubble and pointed to geopolitical risks as the main source of uncertainty.finanztrends.de

Protests and budget fight

More than half a million people marched across France over the weekend in protests against school underfunding and the cost of living. Some of the demonstrations turned to looting and violence, and more than 2,300 people were arrested. Carrefour cut its profit targets because of the riots. Overnight curfews have calmed the streets for now, but more protests are planned for Saturday.miamiherald.com+2

Prime Minister Sébastien Lecornu's government is trying to get a 2027 budget through a divided parliament. Finance Minister Roland Lescure said on Wednesday that the government will force the spending cuts through if lawmakers do not approve them, a step that could deepen the instability. France's debt stands at around 120% of GDP, and Moody's ↘ 1.55% is set to rule on France's credit rating on Friday.aol.co.uk+1

Election overshadows outlook

Far-right and hard-left candidates lead opinion polls with six months to go before the presidential vote. Both Marine Le Pen and Jean-Luc Mélenchon have pledged to lower the retirement age from 64 to 62.tbsnews.net+1

Peter Kinsella of the Swiss private bank UBP said the European Central Bank "cannot credibly intervene in the absence of a French cost cutting programme, and that will not happen until after the presidential election next May".uk.finance.yahoo.com